The Employers Council on Flexible Compensation (ECFC), a membership organization dedicated to promoting and protecting the availability of benefit choices for working Americans through account-based benefit plans, has requested guidance from the Department of the Treasury and the Internal Revenue Service (Agencies) on a variety of issues related to the qualified small employer health reimbursement arrangement (QSEHRA).
“Many ECFC member companies will administer these new QSEHRA or advise employers about the establishment of these arrangements. Consequently, we believe that it is imperative that the Agencies provide guidance as soon as possible to assist employers in determining whether they should establish a QSEHRA and plan administrators in designing procedures for the administration of these arrangements,” ECFC states in a letter to the Agencies.
Employers eligible to offer a QSHERA. Only “eligible employers” (generally, an employer that is not an applicable large employer (ALE) and does not offer a group health plan to any of its employees) may offer a QSHERA. The ECFC indicates that because the term “group health plan” in Code Sec. 9831(d)(3)(B)(ii) does not reference any other Code section as a definition of that term, guidance is needed for employers to understand whether they are currently offering a disqualifying group health plan.
In addition, the ECFC requests confirmation that the rules for determining whether an employer is an ALE subject to the shared responsibility payment under Code Sec. 4980H are applicable in determining whether an employer is an ALE that is not eligible to establish a QSEHRA.
Reimbursements from a QSHERA. Reimbursements from a QSEHRA may only be made for eligible expenses for medical care for the eligible employee and the employee’s family members after an employee has provided proof of coverage. The ECFC notes that the term “proof of coverage” is not defined in the statute and requests confirmation that reimbursement by the QSEHRA of medical insurance premiums of a policy that provided minimum essential coverage (MEC) would be considered proof of coverage for this purpose.
The ECFC also requests confirmation and guidance on the following reimbursement issues:
• an employer could offer a QSEHRA that limits reimbursements to premiums for health insurance;
• an employer can design its plan to provide reimbursements in the manner that it desires as long as reimbursements are limited to qualified medical expenses under Code Sec. 213(d) and the employee provides proof of coverage;
• a QSEHRA that reimburses at the maximum for individual and family coverage should be considered providing coverage under the same terms for all eligible employees regardless of the difference in price between a health policy with single coverage and one with family coverage;
• an employer’s involvement with after tax payroll deduction for any excess cost of a QSEHRA funded policy (i.e., amounts in excess of the statutory limits) should not cause the employer to become ineligible to offer a QSEHRA;
• an employee can attest to the plan administrator that her or she has MEC and the plan administrator would not have to request or review any additional documentation; and
• if it is determined that a reimbursement from the QSEHRA is not excluded from income because the employee does not have MEC in the month in which the medical expense was incurred, the reimbursement must be included in the employee’s income as supplemental wages, how should these amounts be reported and withheld upon.
Annual notice. Regarding the annual notice that must be provided to employees, the ECFC indicates that it would be helpful to employers establishing these plans for the Agencies to provide a model notice that will satisfy the notice’s requirements.
The ECFC also requests confirmation of its understanding about when the notice must be given. “In the years after the QSEHRA is initially established, the notice would be given 90 days prior to the beginning of the plan year. Confirmation of that interpretation would be helpful so that employers may make reimbursements from a QSEHRA as soon as possible after the QSHRA is established,” the letter states.
SOURCE: ECFC letter “Re: Qualified Small Employer Health Reimbursement Arrangements under the 21st Century Cures Act,” February 23, 2017, ecfc.org
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